AP1, Stockholm, reported a -8.6% investment return in 2022, with fixed-income and equity losses more than offsetting positive returns from the pension fund's real estate and infrastructure allocations.
In 2021, the investment return was 20.8%. Assets fell 9.5% over the year ended Dec. 31, to 421.2 billion ($40.3 billion) Swedish kronor.
The net investment return amounted to a loss of 39.9 billion kronor, compared to a gain of 80.7 billion kronor in 2021.
"2022 marked a dramatic end to the market environment of low inflation, record-low interest rates and growth that have boosted returns on financial assets since the global financial crisis of 2008," Kristin Magnusson Bernard, CEO of AP1, said in a news release accompanying a financial update Thursday.
Due to simultaneous drops in equity and fixed-income returns through most of the year, investors across the globe struggled to grasp market directions, she added.
"We have proactively changed our positions based on changing market conditions, for instance by lowering equity exposure and reducing the duration of the fixed-income portfolio," Ms. Magnusson Bernard added.
In 2022, AP1's investments in equities lost 20.4%, while fixed income lost 13.2%. Real estate and infrastructure contributed positive returns of 7.4% and 9.8%, respectively.
The fund's annualized five-year return as of Dec. 31 was 6.7%, compared to 10.6% in 2021, while the annualized 10-year return was 8.1% compared, to 10.3% in 2021.
AP1 invested 47.9% of its assets in equities, which consists of global and Swedish equities. Global equities accounted for 29.1% of the fund's overall assets, while Swedish equities were 18.8% of its assets as of Dec. 31.
Some 28.6% of the fund's assets was allocated to alternatives. The allocation to alternatives was made of real estate and infrastructure at a total 19.6%, and private equity at 7.9%.
The rest of AP1 assets were invested in fixed income.
AP1 said in the update that it has reduced the carbon footprint of its listed equity portfolio by 57% since 2019.